Escrow Accounts in Thailand

An escrow account in Thailand is a financial arrangement designed to protect parties in a transaction by holding money or assets with a neutral third party until agreed conditions are fulfilled. While escrow mechanisms are widely used internationally, escrow in Thailand is governed by specific laws and practices that differ from those in common law jurisdictions. Understanding how escrow accounts work, when they are legally required, and their limitations is essential for buyers, sellers, investors, and developers—particularly in property transactions.

This article provides an in-depth analysis of escrow accounts in Thailand, covering the legal framework, types of escrow arrangements, practical applications, procedural requirements, benefits, limitations, and common risks.

1. Legal framework governing escrow accounts in Thailand

Escrow accounts in Thailand are primarily governed by the Escrow Act B.E. 2551 (2008). The Act was introduced to enhance consumer protection, particularly in real estate transactions, by ensuring that funds paid by buyers are safeguarded until contractual obligations are met.

Under Thai law:

• Only licensed escrow agents may legally operate escrow accounts

• Escrow arrangements must comply strictly with statutory requirements

• Escrow is not automatic and must be expressly agreed upon by the parties

Unlike some countries, escrow services in Thailand are regulated rather than informal contractual arrangements.

2. What is an escrow account under Thai law?

An escrow account is an account where:

• Funds or assets are deposited by one party (usually the buyer)

• A licensed escrow agent holds the funds

• Release occurs only when specified conditions are satisfied

The escrow agent acts as a neutral intermediary and has a fiduciary duty to both parties.

3. Licensed escrow agents in Thailand

Not all banks or professionals can act as escrow agents. Under the Escrow Act, authorized escrow agents include:

• Commercial banks

• Specialized financial institutions

• Certain non-bank entities licensed by the Ministry of Finance

Law firms, real estate agents, and developers cannot legally act as escrow agents unless separately licensed.

4. Common uses of escrow accounts in Thailand

4.1 Property sale and purchase transactions

Escrow is most commonly used in:

• Off-plan condominium purchases

• Residential property sales

• Large-scale development projects

The buyer deposits funds into escrow, and the money is released when:

• Ownership transfer is registered at the Land Department

• Construction milestones are achieved (for off-plan units)

• Contractual conditions are fulfilled

4.2 Off-plan real estate developments

For off-plan sales, escrow helps protect buyers against:

• Project delays

• Developer insolvency

• Failure to deliver units as promised

Developers receive funds only upon meeting agreed construction stages.

4.3 Commercial and business transactions

Escrow accounts may also be used for:

• Share purchase agreements

• Mergers and acquisitions

• Licensing or franchise agreements

• Payment security in high-value contracts

However, escrow usage outside real estate is less common and more flexible.

5. Escrow agreement requirements

A valid escrow arrangement requires a written escrow agreement, which must specify:

• Names of the parties

• Identity of the escrow agent

• Description of assets or funds deposited

• Conditions for release

• Timeframes and procedures

• Fees and costs

• Dispute resolution mechanism

Ambiguity in escrow terms can lead to disputes or delayed release.

6. Procedure for setting up an escrow account

The typical process involves:

1. Agreement between buyer and seller to use escrow

2. Selection of a licensed escrow agent

3. Execution of the escrow agreement

4. Deposit of funds or assets

5. Monitoring of contractual conditions

6. Release or refund of funds

The escrow agent must keep funds segregated and properly accounted for.

7. Rights and duties of the escrow agent

The escrow agent has strict legal obligations, including:

• Acting impartially

• Following the escrow agreement precisely

• Safeguarding funds

• Maintaining proper records

• Releasing funds only upon fulfillment of conditions

Failure to comply may expose the agent to civil and administrative liability.

8. Benefits of escrow accounts in Thailand

Escrow accounts offer several advantages:

• Protection against fraud

• Reduced risk of non-performance

• Increased trust between parties

• Improved transparency

• Legal safeguards under the Escrow Act

For foreign buyers unfamiliar with the Thai system, escrow adds an extra layer of security.

9. Limitations and misconceptions about escrow

Despite their benefits, escrow accounts have limitations:

• Escrow is not mandatory for all transactions

• It does not guarantee project completion

• It does not override contractual terms

• It does not protect against poor drafting

Escrow protects funds—not the quality or legality of the underlying transaction.

10. Escrow vs. direct payment arrangements

Many property transactions in Thailand still rely on:

• Direct payment to developers

• Installment schedules without escrow

• Reservation deposits held by sellers

While legally permissible, these arrangements carry higher risk, especially for off-plan purchases.

11. Disputes involving escrow accounts

Disputes may arise over:

• Whether conditions have been fulfilled

• Delays in release

• Contract termination

• Insolvency of one party

Courts generally enforce escrow agreements strictly. The escrow agent will not release funds without clear legal or contractual authority.

12. Escrow accounts and foreign buyers

Foreign buyers often prefer escrow arrangements because:

• They reduce exposure to unfamiliar legal systems

• They provide documentation and traceability

• They align with international best practices

However, foreign buyers must still comply with Thai laws on property ownership, condominium quotas, and fund remittance.

13. Tax and fee considerations

Escrow fees vary and are usually agreed upon by the parties. Escrow arrangements do not eliminate:

• Transfer fees

• Withholding tax

• Specific business tax

• Stamp duty

Tax obligations remain governed by Thai law regardless of escrow usage.

14. Practical risk management tips

To maximize escrow effectiveness:

• Use only licensed escrow agents

• Clearly define release conditions

• Align escrow terms with the main contract

• Conduct legal due diligence

• Avoid informal or “lawyer-held” escrow substitutes

Escrow should complement—not replace—legal review.

Conclusion

Escrow accounts in Thailand are a valuable legal and financial tool, particularly in real estate and high-value transactions. Governed by the Escrow Act, they provide structured protection for funds and enhance trust between parties. However, escrow is not a universal solution and must be carefully implemented through proper agreements, licensed agents, and sound legal advice.

For buyers, sellers, and investors—especially foreigners—understanding the legal scope, benefits, and limitations of escrow accounts is essential to managing risk and ensuring transactional security in Thailand.